Financial Analysis and Investment Appraisal for Canon Inc. Expansion

This report provides a comprehensive investment appraisal for Canon Inc., analyzing the company's financial performance and potential for expansion. It begins with an executive summary and a discussion of the motivation behind the proposed investment, particularly in the context of the COVID-19 pandemic's impact. The report then delves into both quantitative and qualitative methods used for investment appraisal, including the payback period, net present value (NPV), internal rate of return (IRR), PESTLE analysis, and SWOT analysis. The quantitative analysis provides detailed calculations and interpretations of financial metrics, while the qualitative analysis assesses the company's strengths, weaknesses, opportunities, and threats. Furthermore, the report critically discusses the risks and returns associated with the investment, emphasizing sensitivity analysis and its impact on financial performance. It concludes by highlighting the importance of cost-benefit analysis and the potential for long-term profitability, supported by references to relevant literature.

Accounting and
finance for decision
making

Table of Contents
1. Executive Summary.....................................................................................................................3
2.The motivation for the proposed investment................................................................................4
3. Conduct investment appraisal using both quantitative and qualitative information....................4
4. Critically discuss the risk and return and its potential impact on its financial performance ......7
REFERENCES................................................................................................................................9

1. Executive Summary
According to the below report, the effect of Covid – 19 on the company that would vary
the risk of the business are discussed. In the following report, the impact of the pandemic on a
company Canon Inc.'s business is described. Canon Inc. is a Japanese multinational corporation
founded on 10th August 1937 situated in Ota, Tokyo and japan that manufacturer and supplier of
optical, imaging and industrial products. The company is popular and ranked holder in the
worldwide market because of the continuous innovation of products like cameras, printers,
medical machinery and scanners.
The main aim of the report is to suggest to the organization on investment how profitable
and favourable the company Canon Inc. is on behalf of investor point of view. This report covers
all about a proposed investment that Canon Inc. will think to opt for expansion and growth of the
company. The company consider the investment by analysing and calculating some investment
that would help the business in the long term. Investment appraisal techniques methods are used
in this report to determine the risk and plan of the company for decision making.
For Satisfaction, the needs of the company in terms of investment are concluded and
suggested that might take place according to the above analysis and framework of the report of
the company Canon plc. The company consider the NPV approach for business investment.
Recommendations provide the information about the organization that the target of the
organization on the expansion of its business by consuming and approaching other popular firms.

2.The motivation for the proposed investment
At the time of Covid – 19, the Canon company are more affected because during the
pandemic time population only focus on health and food. This situation decreases the company's
productivity and sales all over the world.
It is very important to resolve this problem for company growth and development in the
worldwide market because if the company is not making a proper decision for upcoming years
then the possibility of business loss will arise (Balios, 2021).
Most companies or an organization starts advertising and selling their products or
services on social media platform because at the time of lockdown the companies suffer from
huge risk and losses. But after this huge step company decreases its economic and monetary
position of the company in the market (Wang, and et.al., 2020).
Casual drivers play an important part in an organization. It helps in solving the problem
of Canon company accounting and financial position in decision making that include organising
and motivation as a manager for analysing risk that occurs in the business market between its
opponents. It is a time-consuming activity for the firm because the analyses result are derived by
collecting both the stability and weakness of the firm.
The capabilities are the strength of the company helping in increasing the profit and
business expansion and also giving them knowledge of company efficiency. After this increment,
the business is motivated and starts investing in new projects for more money (Guarnieri and
Trojan, 2019).
Deliverables are the type of thing which is used in measuring the capability of the
business and how much power they have to invest in a project that provides it back which is hard
to determine as an investor or an entrepreneur because all the firms invest on those businesses
which are popular and collecting more profits and helpful in business expansion and growth on a
huge platform.
3. Conduct investment appraisal using both quantitative and qualitative
information
The company needs information before investing in Canon business. Quantitative and
qualitative methods are used by the company to collect the information about the company while

quantitative includes Payback period, Net present value and IRR and qualitative include swot
analysis for analysing the Canon company position.
 Payback Period
Year
Annual
Cash
Inflow
Annual Cash
Outflow
Annual Net
Cashflows
Cumulative Cash
Inflows
0 0 180000 -180000 0
1 100000 800000 -700000 -700000
2 400000 200000 200000 -500000
3 500000 0 500000 0
4 800000 0 800000 800000
5 800000 100000 700000 1500000
Payback period = Number of years + Uncovered Amount / Cash Flow in recovery year
= 3 years + 0/50000
= 3 years
 Compute of Net Present Value
Years
Net Cash
Inflo
ws
Discounting @ 8% PV of Cash Inflows
1 -180000 0.926 -166680
2 -700000 0.857 -599900
3 200000 0.794 158800
4 800000 0.735 588000
5 900000 0.681 612900
Net Present Value 593120

 Calculation of Internal Rate of Return
Discounting Factor @8%
Years
Cash
inflows
Discounting Factor
@8%
PV value of cash
inflow
1 -180000 0.926 -166680
2 -700000 0.857 -599900
3 200000 0.794 158800
4 800000 0.735 588000
5 900000 0.681 612900
Total Cash inflows 593120
Discounting Factor @15%
Years
Cash
inflows
Discounting Factor
15%
PV value of cash
inflow
1 -180000 0.87 -156600
2 -700000 0.756 -529200
3 200000 0.658 131600
4 800000 0.572 457600
5 900000 0.497 447300
Total Cash inflow 350700
IRR = Lower rate + Lower Rate NPV/ (Lower Rate NPV – Higher Rate NPV) * Diff. in Rates
= 8% + (593120 / 593120 - 350700) * (15 – 8)
= 8% + (593120 / 242420) * 7
= 8% + (2.45) * 11

= 8% + 26.95 %
= 34.95 % PESTLE AND SWOT ANALYSIS
PESTLE analysis of Canon:
Political Factor: The canon company set their guidelines, spends less and earns more which helps
the company to rule government because it generates huge revenue in most the countries that
increase the country's GDP (Heller, 2019).
Economic Factor: It plays a vital role in business. After the situation of Covid-19, the company
strongly focus on the medical system because the cost of canon products is very high that
consumers cannot be bought.
Social Factor: It is the factor where canon company mostly focus because it values the customer
needs. Canon provides products according to satisfy both B2B and B2C needs.
Technological Factor: Canon is the most popular company or brand in terms of technology. It
produces more quality products and always comes up with innovation and technology.
Legal Factor: The company need to follow all the rules and regulation according to the country's
laws. Canon company has many problems in terms of legal factors because rules are difficult to
operate according to the different countries (Khan, 2022).
Environmental Factor: The company canon perform several activities to save the environment by
reducing the use of carbon and utilizing wastewater.
SWOT Analysis
Strength
Canon has a good product range to meet
individual's and office needs. Diversification
helps Canon in mitigating risk and increases
profitability. It is known for its research and
development and has different patents for its
technology. The brand image of Canon is
very good as it operating in all over the
world.
Weakness
Canon has a wide variety of products but is
mainly recognised through imaging devices.
Its other products are not so well built up.
There is also an issue in product consistency
which can impact the company’s reputation.
Opportunities
There can be many opportunities come
Threats
Canon faces the threat of shrinking camera

across in near future for Canon such as the
development of digital printing, the
development of the consumer electronic
market, new trends in consumer behaviour,
development of medical services that will
open new markets for Canon.
demand as the photography industry has a
major influence on smartphones. Changes in
the price of raw materials can be a threat to
the profitability of Canon. And to cope with
the rapid developments in technology, the
company needs to be adaptive.
4. Critically discuss the risk and return and its potential impact on its
financial performance
Sensitivity analysis plays an important role for the company to measure its risk and return. This
helps in eliminating uncertainty about the future by simulating financial risks and decisions.
When it is used efficiently, it can help in identifying risks and productive opportunities and
enhances future forecasting. For Canon, it helps in analysing how investments impact revenues
and how customer traffic impacts sales (Kim and Chawla, 2022).
The cost of capital which is taken for measurement of discount models is applied at the rate of
8%. It is beneficial for the project with low risk. So, the company foresee investment in the
project with effective cost benefits. Canon will continue to make investments in new technology
initiatives which causes an increase in the cost of capital. And the higher the cost, the higher the
return will be. Cost-benefit helps analyse the actual and anticipated cost in accordance with their
upcoming projects.
The NPV for the company Canon’s project is £593120 for the investment. It is very
beneficial for the company which gives higher productivity and long term profits in long run on
grounds for further investment (Metcalf and Pradeep Gupta, 2021). And the method applied here
for calculating NPV must be utilised and should focus on the enhancement of the firm for future
growth and returns. The present worth of the company is being recorded with consideration of
futuristic events and income sources by undertaking a planned project. The major idea behind
such policies is to attract as much as investors, shareholders and the public to invest in
abundance which helps in making the brand value and overall growth of the company (Pousttchi
and Dehnert, 2018).

To evaluate the profitability of a project, the discounted payback period is calculated for
each additional period’s cash inflow to check the point at which outflows equal the inflows. The
discounted payback period helps in recovering the time of initial expenditure. It infers that as
much as shorter the discounted payback period would determine that quicker the chances of
repaying initial expenses with the manufacturer and financial resources. The payback period is 3
years for the above-proposed plan against the investment of an amount of £ 180000. It gives a
thought about the condition of the company and whether to put sources into the arranged
undertaking that would be beneficial as well as productive or not(Palm and et.al., 2019).
After critically analysing the financial performance of the company Canon, it can be
assumed that the profit margin of the company is declined in the year 2022, but its return on the
equity is in the increasing phase which means it is beneficial to invest in the company as the risk
rate is low so, the return will be high.

REFERENCES
Books and Journals
Balios, D., 2021. The impact of Big Data on accounting and auditing. International Journal of
Corporate Finance and Accounting (IJCFA). 8(1). pp.1-14.
Guarnieri, P. and Trojan, F., 2019. Decision making on supplier selection based on social,
ethical, and environmental criteria: A study in the textile industry. Resources,
Conservation and Recycling. 141. pp.347-361.
Heller, F.A., 2019. Leadership, Decision Making, and Contingency Theory. In Managing
Democratic Organizations (pp. 211-227). Routledge.
Khan, M.A., 2022. ESG disclosure and Firm performance: A bibliometric and Meta
Analysis. Research in International Business and Finance. p.101668.
Kim, J. and Chawla, I., 2022. 26 The Role of Socialization in Shaping Personal Finance
Attitudes and Behaviors. De Gruyter Handbook of Personal Finance. p.451.
Metcalf, B. and Pradeep Gupta, C.M.A., 2021. FINANCIAL FORECASTING AMID COVID-
19. Strategic Finance. 102(10). pp.36-41.
Palm, R.I. And et.al., 2019. Earthquake insurance in California: environmental policy and
individual decision-making. Routledge.
Pousttchi, K. and Dehnert, M., 2018. Exploring the digitalization impact on consumer decision-
making in retail banking. Electronic Markets. 28(3). pp.265-286.
Wang, Z. and et.al., 2020. Drivers and outcomes of supply chain finance adoption: an empirical
investigation in China. International journal of production economics. 220. p.107453.